is extremely important. i wanted to be down here to join these electors panel of guests as well. the payroll tax in san francisco had been one -- i was here about a year ago explaining twitter. as everybody knows, they were not only threatening, they were planning to leave the city of san francisco. they had already identified a building. they said, we are about to grow to about 2000 employees and we are quick to get taxed for that. we think that is not going to be our business model. so we fought through it, david chiu, jane kim and i, we started to discuss with them, met with them. the key thing was job growth for our city, coming out of the economic challenges. so we started a good conversation, started the central market tax exemption.

we got something out of it, which was to potentially relocate. they responded by signing the lease and we gave them a six- year exemption. we also said that we would have dialogue, continue to discuss with them and other technology companies what it is we reading they need to stay in the city. they indicated strongly there were about 30 of us to meet -- they really had to look at the long term. what could we do to not punished job creation? so we have had a very robust discussion with all the different elements of our business community. we are at the cusp now of making some long-term decisions about replacing our payroll tax with some ideas of hybrids and gross receipts. >> i want to follow up on that.

what surprises did you hear when you met with all those businesses? >> they wanted to be engaged. that was the number-one thing that they said. the city, if you wanted job creation, innovation, you had to create an ongoing dialogue. we listened carefully and acted on it. we created a whole technology group. ron conaway and others have stepped up and said, why don't we have a consistent voice? yes we have the chamber of commerce, the wonderful group we have worked with for many years, but why not also have an additional voice? so we formed sf city, a citizen's initiative for technology and innovation, which was aimed at the new developing companies to give us a constant dialogue about their ongoing needs. anything we have done is they have also embraced the needs of

our city. it is a two-way conversation. that led to us revising our stock options. we were one of the few cities in the country that was taxing stock options. again, not understanding how the ipo was working for the startup companies, realizing that we would be punishing them for their growth and turnaround, so we gave them another six-year exemption on that. by the way, if we grow, if we sustain and assist you in growing, can you help us with job training? that is what started the conversation on sf city. they have an ongoing program to create the curriculum for hiring kids or our public schools and aimed at returning veterans, career folks that want to get into technology-based industries, and then the

snowball effect has really helped. twitter, not even moving in -- there are four companies that have moved into the market because of this. san disk, zoosk, allie pincus started an on-line returned as an company. hundreds of square feet of space that had been vacant for many years. revitalizing our city of the same time, doing job creation, creating the conditions for hiring and training local 7 siskins to get into the workforce. as andy is saying, that has caused other industries, particularly the construction industry, to get revitalized immediately. you have heard sales force had 18 acres in mission bay. they got excited about just being downtown, so they went

ahead and did 400,000 square feet, now looking at an even larger space to continue their growth downtown. >> i want to direct this next question to you, lisa. every company in the valley, no matter how it is defined in terms of geography, has been a start up at some point. where did the idea for great products and services come from? >> thank you very much for allowing me to be here to address you today. that is a great question. i want to start by thanking the city of san francisco for being a part of an incubator that we are a part of, the kiwi3 innovation center. it is located in san francisco next to the ucsf mission building. there are lots of biotechnology laboratories available. about 29 startup companies in that space developing innovative

technologies. i am in biotechnology primarily. our technology creates oil using a biological process that takes waste carbon as an input. ideas such as ours often come from universities and it is a real benefit for us to be by ucsf to be part of the innovation center. not only is ucsf a part of that, but uc-berkeley and uc santa cruz. so we are part of this network. in addition, we have technology partners with berkeley laboratories. for us, a lot of the breakthroughs in our technology have really come from our partners that research laboratories and our staff. i would add to that, not only is that where it came from, but it is the type of environment that fosters creation.

there is another benefit to being in this type of environment. lots of service providers, lots of other companies that are also starting businesses, whether you need legal assistance -- obviously, we have the lab space. recruiting is important for start-ups. staffing, exactly. so we have that as part of this innovation center. >> access to education and access to the right environment. >> yes, i would say so. >> ibm is a big company. i am sure there are a lot of people in the valley that still see it as an east coast-based company. the reality is you have been here for a long time. can you talk about the ontario culture here and what is being done that with the great ideas -- a entrepreneurial culture here and what is being done with the great ideas? >> we started here in 1962.

this building is about 25 years old. we were down the hill at the san jose raiders center. -- research center. one of the things that ibm does -- a couple of things. one is having an eye on where things are going. one of the reasons that we focused here on data, relational database disk drive, was, looking at the time, the inability to access data quickly on a computer was actually an inhibitor to getting business done. one of the ways that you get innovation out there is you understand how it is going to be used, really, before you start.

the major reason for working on the disk drive, aside from the obvious technology base that this place has and continues to have, was just an understanding that high-speed access to data would create an opportunity. remember, this was 1955. we reinvented ourselves. ibm made the first product with cheese slices. we cannot do that anymore. [laughter] this place also reinvents itself in a continual basis. in that sense, we feel very much at home here. the ability to reinvent, the ability to have a real sense of where things are going is also something we see in the bay area.

strategic view. one of the things that i learned we do not talk about as much in the bay area is this amazing mentoring culture. we see folks like lisa who are young, dynamic maniacs -- i think -- but there is this a very active, quiet, kind of a grey-haired mentoring culture that helped people do what they do. i do not see that anywhere else. people give up their time, give of themselves. it is just a spectacular way to foster innovation. >> i want to talk about innovation in the bay area for a moment. this is for all of you, but i will start with you, mayor lee. how would you describe the state of innovation in the bay area

right now? are you concerned -- instagram comes to mind -- about a bubble? >> we have been trying to analyze that question with financial people and people in the industry. i do think there is more maturity with the companies. i get a chance to go out and talk to one new company week, when i get out of my city hall prison to meet the innovators. they introduced me to their employees. i get to have a direct dialogue with the employees and ask them what they need to stay. they say they really like being in our city because of the night life, the culture. they want education, they want a better transit system. they always have ideas to improve the municipal transit system. but when the talk about the bay area, including silicon valley, it is the same thing.

transportation symptom -- systems, central subway, high- speed rail. clearly, bart to san jose has been incredibly important to everyone, so that people could travel. i think there is a lot more maturity. there are many successful company that have already turned a corner on making a profit. start-ups have long-term views. they are not looking for instant gratification, as i believe the attitude was in the late 1990's, 2000's. people are talking a lot about issues on stability and asking government, like ours, to be with them in the long term, and to create relationships. certainly, for capital investors, it really is that relationship building. they want that face-to-face time with investors around our city. so we are creating conditions for that to happen. they are not short-term leases,

these are long-term leases. twitter signed in for a good 10 years. others have signed long-term leases as well. they are in it for the long haul. i think they are measuring their success, building it up on that. not only innovating and starting up, we want them to stay and grow. we have been creating those conditions for that conversation to happen. >> michael connolly said, anything to add to that? is this the right time in the valley? is there a bubble? >> i would like to speak about the clean technology sector. there was a little bit of a bubble that emerged in 2005, 2006, 2007 time frame. what has happened since then is you see the landscape changed. there have been a lot of companies and vc's, founders,

that are focused on very few investments in companies but are in it for the long run. the time and invested it takes to build a clean tech company. the difference with clean tech, there might be large facilities required, investment to build your first plant, for instance. we are seeing a change in the landscape. one thing i want to add, too, for clean tech, there are organizations like the clean tech opened that foster innovation and identify and help on to produce with that system, present their idea, put together their business plan, attract the mentors and advisers to help them build their technology. the incubators are contributing to a maturing clean tech and biotech sector -- sector. >> just a short comment. we focus in this building, a research center, on technology. some of it is near term, some of

it is very long term. i am glad to hear what we suggest said. i worry personally that we do not see as many long term investments as we used to. >> how do you define a long-term investment? >> good question. so, i think the question is, how speculative is this? i will use us as an example. we have a team in this building working on lithium batteries. their goal is to build a battery with 500 miles of range, for obvious reasons. we hope they will have a prototype in the feet next few years. we think -- in the next few years.

we think the stars are lined up. that is a long-term investment. >> next question to all of you. michael, we will start with you. we know government is the regional -- at the regional, state, and local level can help or hinder startup companies. what would you like to see from the governments here in the valley, sacramento, or in d.c., that would strengthen the innovation economy? >> i could go on about immigration and corporate tax policy reform, but i am a researcher, so i will not. >> and we have seven minutes. >> mayor lee said it perfectly. the fundamental thing that companies are looking for is to be engaged in the process. we use a term in computing called agile. we look for more ability and the

possibility to work with us, iterate in the process, rather than what we often see as we call the waterfall, take-it-or- leave-it. flexibility and agility is what is most important. >> mayor lee? >> i have always thought of our city as being the gateway to the rest of the world. i have often talked, with companies, i want to be with you when you turn the corner. we want to be the city that treats international markets for your products. i do not know if you know this but we have 70 counsel general offices in san francisco, the highest number outside of washington, d.c. we want to make sure that our companies know we are not just in it for san francisco, the region. we have to tap international markets. they love hearing that. some of the companies already know that they have game players in china and japan, but also,

clout computing, all the technology breakthroughs have international capacity. i think that is why we need a regional approach. that is why i am here, to make sure we protect our hetch hetchy water system. that creates the standard of living that we want, that keeps people here. that is why we have regional transport systems. whatever companies do not come here could end up going to europe or japan or china. we want them to maybe have their headquarters here in the bay area. >> is there one regional issue that elected officials across the region could focus on? if we are back here 12 months from now, i am able to ask you the question -- here is what you said 12 months ago and here is where we are now. is there one thing? >> i think it will be

transportation. we have to make that infrastructure investment. we have to get our federal and state government more aligned. i know jerry is a big fan of our high speed rail, but we have to turn the corner on that. for us, in san francisco, a third of our flights out of sfo is to los angeles. we cannot have the capacity for international flights. the whole secret behind international success is having those flights coming in. unless we move that l.a. commute over to high-speed rail, which is an excellent thing, we will not be able to treat the capacity we need because we cannot expand the airport. >> last word to you, lisa. >> i will sit a couple of things slightly differently. one of the core things that started to do is they develop lot of ip. when getting our patents filed, approved, it is a very long run

up process. if there could be emphasis on accelerated patenting process is, that would be beneficial. maybe even having a patenting office here in the silicon valley. i know there are some that have pushed for that in the past. the other thing i will add about funding and investing, the different initiatives that governments have, grants and are given to -- that are given to foster and push innovation is something that is done very well in the university setting. i think further investing in companies that take the research at the commercialization phase is something that we have benefited from and would love for that to continue. >> the last question for the panel is to you, lisa. say, this is a room of potential funders. what is your elevator pitch?

[laughter] >> absolutely, great. we are addressing two issues. on the one hand, there is an ever-increasing amount of waste that is generated. as the drift toward 9 billion people in 2014, we are generating waste in landfills, manufacturing waste, agricultural residue, etc. is there a wayon the other handa court feedstock with almost everything we use, whether it is plastics, detergents, obviously fuel. how can we address a sustainable source of oil? we have bridged the gap. we have developed an innovative technology. a two-step process that taste -- takes a variety of ways to carbon resources and converts them into oil through a biological process. we do it at a lower cost and

sustainably, and it has a benefit for not only industry but the planet. >> i will go get my checkbook. a round of applause for our panel. [applause] according to carl, we have five more minutes. so you get to clap again in five more minutes. [laughter] you have all talked a little bit about the culture here. how important is it that the environment here succeeds in continuing to draw people and draw talent and investment? the example we heard in your introduction was you went to school add mit. you came here to start your business. there is another guy on facebook who has said if he had it all to do over again, he would have stayed in boston. how important is that culture

and environment? >> it is critical. it is critical to have minds that have been educated, interdisciplinary people coming to the table, different perspectives, that energy and enthusiasm around thinking differently, and around paradigm shifts, around developing breakthrough technologies, and to be able to attract those people to this area is crucial. i think that that is something that has been a benefit of being here, that a lot of people are attracted to silicon valley. that is crucial to any company starting in taking their technology to the next level. >> can you talk about the incubator? >> yes. >> the qb3? >> yes, mission bay, everybody knows. uc san francisco has conduct encourage it with research. some of the larger companies that research labs in mission bay as well.

bayer and others. they are even innovating about their laboratories, because it is so expensive to build your own laboratory. so they are trying to bring some of these pharmaceutical answers to the market faster. they have an incredible spirit of innovation in those laboratories. and they are inviting other companies, not just from the bay area air even our country, they're inviting international. we had our first canadian incubator that was established just a couple months ago. they are excited to be kind of cross-referencing their research and ideas. >> why are they coming here? >> they are coming here because there is really ongoing levels of conversation and sharing of experiences that are part of, kind of, thinking outside of the box and thinking in different ways, turning things upside down, hacking your way through

some of these ideas and not being afraid. and trying to find applicability for them. that is the spirit of the valley, the spirit of san francisco. we have always been edgy when it comes to openness. we're taking advantage of that. we want to embrace different cultures to impact that as well. what people see here might be different from how they see it in india and some of the other countries that are emerging here, trying to apply it in ways which would have a great benefit, or just thinking very differently about it. i think the spirit of innovation is an attractive thing for talent. obviously, education is behind it as well. there's a lot of confidence about being able to risk in being a little more risk-taking. that is part of, kind of, my leadership. i did not apply to be the mayor of san francisco. i took that risk with a very good knowledge that -- sure, i may not be a supreme politician,

but i wanted to build a different relationships with people. we have done that. we have invited a lot more different kinds of talent to come in and use that free spirit in innovating. >> michael, last word. >> yes, knowledge gets created with the people who think about the problems. and what must be sustained here is that focus on getting feet into the problem. with understanding the problems comes the ideas. this is an idea-generating place. like no other. i spent three years living in beijing, and i watched what they are trying to do over there. fundamentally different. here, it is inherently and opened, bottom-up idea meritocracy. it is a good way for this place to be. >> i want to follow up on that. because there are so many other places in the world that want to

replicate what we have here. is that possible? >> what is the appropriate answer? anything is possible. i think there is a bunch of things that come together here. education is a big part of it. as much as we have talked about the challenges we have in educating our youth, it is still the case that education here is as much about the journey as about the end result. my personal belief is that as long as we keep that focus on the inquiry as opposed to the yes/no result, we will do fine. when you look at other parts in the world, my view is you can gauge how innovative a populace

you're going to generate by the way they educate their people. >> you know, i would say that he has a great point there. i think it in fights collaborative approaches to problem-solving as well -- it invites a calendar to the approaches to problem-solving. we are having a great conversation in san francisco about this shared economy, a collaborative thing. it began to me by car-sharing. i was a big fan of car-sharing and the electric vehicles to see if we could get less emissions. now we're looking at companies, including smaller innovative companies, looking at shared space and how to complement our environmental goals here with new economies that are merging out. i think that is challenging the way our tax structure has been and the way we look at certain industries, but inviting a collaborative spirit of new ideas that would create literally new jobs and new

economies. it is exciting. when you allow collaborative approaches to be focused on. >> i promised the last word on the panel. >> great. the one thing i will add to that is that, speaking to michael's point earlier, one thing you have here, a lot of people who have done it, that started companies. they succeeded, failed, succeeded. they had invested. they have done all of the things that we at start-ups are trying to do and are navigating through. having both those that are being educated coming up with the bright ideas and the desire to start something new in those who have done it, it creates a great a the system. >> now a round of applause for our panel. [applause] >> panelists, what an outstanding discussion on regional innovation. james, as always, it is a delight to partner with you.